WHY AREN'T THERE ENOUGH JOBS?

My favorite definition of economics is: "The study of the allocation of scarce resources"

Sounds simple enough but it identifies two critical issues:
1) Resources are scarce
2) How resources are allocated (and utilized) is important -- critically important

Jobs are created when resources (capital) are applied to productive activity (including both making stuff of value and providing services that help people make stuff of value). Presently, economic activity in the US totals about $16 trillion annually. Of this activity, government at all levels accounts for about $6 trillion. The great majority of this government activity consists of non-productive, administrative-type stuff and massive amounts of transfer payments taken form some citizens and given to others.

The 6$ trillion spent by government was removed (reallocated) from the productive, job-creating sector of the economy. If we want more jobs, we must elect candidates that will fight to radically decrease the size of government and return (reallocate) a large portion of the scarce resources confiscated by government back to the productive sector--back to those who earned it in the first place--so they can invest it in additional productive, job-creating activity (which they will do if given the chance).

In my next post I'll talk about why government and consumer spending can't get us where we all want to go.

God Bless,

DWD

ECONOMIC MISCONCEPTIONS #4 -- WHERE TO CUT SPENDING

Most conservatives express the opinion that government should cut spending. But what should be cut and how big do the cuts need to be? The most common opinion is to cut foreign aid. The areas in which cuts are least preferred include education, social security and medicare.

The chart below shows the annual federal spending by category in comparison with the federal deficit (i.e., *the projected average annual deficit over the next five years). What I conclude from this chart is that the complete elimination of foreign aid will do little to help trim the deficit. In order to eliminate the annual deficit we must address the major spending categories of social security and medicare/medicaid--none of which, unlike defense, are legitimate government activities as enumerated in the Constitution.

As for calls for cutting welfare payments I say, "Amen." However, even an unlikely 50% cut in welfare payments would still leave a huge deficit. And what about cutting Congressional salaries and benefits? Their complete elimination would be like trimming the hog's toenails. And as for eliminating government waste, government and waste are as inseparable as hogs and mud. Discussions of eliminating such waste are themselves a waste (of time and energy).

If we are serious about elimiating the deficit we must call for major reforms to social security and medicare/medicaid. Until we do, no meaningful progress on reducing the deficit (and lowering taxes) can be achieved. As for the contention that we deserve our social security because we paid for it--well, yes and no. While social security taxes are one of the few tax payments that were supposed to be set aside for a specific purpose, in reality Congress has confiscated all such receipts and flushed them into the general tax pot to be spent in any way Congress deemed fit (and all such receipts have been so spent). Deserving or not, there are no, none, nada funds for social security payments. We were duped by Congress and now we must acknowledge and accept this reality and move forward in a way that is best for our children and grandchildren.

Regarding social security, the primary remedy proposed by conservative economists is for social security taxes to be channeled into private savings accounts that the government cannot confiscate and spend (the transition would occur gradually). All funds in these private accounts would be inaccessable to government and so would be virtually guaranteed to be there when the workers who contributed to them finally retire. Systems of private social security accounts have been successfully instituted in Australia and Chile (and many other places).

As for Medicare/Medicaid, the possible solutions are too complicated to be addressed in this space. But make no mistake, meaningful reforms are possible and are currently being proposed in Congress by Paul Ryan and others. However, they need widespread support among conservatives to become reality. We must not oppose these reform proposals because we fear our own benefits may be cut--they must be reduced to some degree in order to salvage our childrens futures while there is still time or we will indeed become known as "the most selfish generation."

As for education, I believe that this responsibility ought to be left to the states primarily because federal education programs discourage school choice and competition and so breed mediocracy.

Have a nice day.

DWD

ONLY ONE SOLUTION

The majority of citizens have a negative view of government. So what is the best way to deal with the problems created by government? There is only one real solution: decrease government's power and influence (and its corruption and waste). And how can this be done? Again, there is only one solution: decrease the size of government. How can this be done? Only one way: decrease the amount of money that it controls. How to do this? Support those who are truly working to decrease government spending.
Who is most active in this area? The Tea Party. Regardless of your opinion of the Tea Party they are the greatest force today in curbing the growth of government.
The scale of government power, corruption, and waste will always be proportional to the amount of money that the government controls, regardless of which party is in power.
Finally, when you look at the numbers it is clear that anyone who professes a desire for smaller government should be in support of reforming (that is, downsizing) Social Security and Medicare which are two of the primary problem areas of government spending (among many others). If you don't like Obamacare, consider that Obamacare is really just the natural extension of Social Security and Medicare.

PS--All of this is not even to mention the problem that (as expressed by Thomas Jefferson) government gains ground at the expense of individual liberty.

Merry Christmas

DWD

REGARDING POLITICAL CORRECTNESS

Does not the following seem applicable to the politically correct rhetoric of today? This is an exert from economist F.A. Hayek's The Road to Serfdom (1944):

Regarding Communism he wrote: "Public criticism or even expression of doubt must be suppressed because they tend to weaken public support... 'Whilst the work is in progress, any public expression of doubt, or even fear that the plan will not be successful, is an act of disloyalty and even of treachery because of its possible effects on the will and on the efforts of the rest of the staff.' When the doubt or fear expressed concerns not the success of a particular enterprise but of the whole social plan, it must be treated even more as sabotage."

Were not the (progressive) liberals of the '60's fighting for free speech and alternative ideas? But now that they have gained power it seems that freedom of expression (i.e., anti-politically correct speech) is to be suppressed, even condemed.

Have a nice day.

DWD

P.S.--Thanks Bowers.

ABOUT FRACKING (AND MUCH, MUCH MORE)

The lady in this video is not to be missed.
It's about fracking but her story goes far beyond that topic.


http://www.youtube.com/watch?v=giwRvzHs5oA&feature=player_embedded


Have a nice day.

DWD

THE FATAL CONCEIT

Nobel Prize-winning economist F.A. Hayek had a lot to say about the failings of socialism. One of his comments dealt with the reality that many men believe to know what is best for each and every citizen (in the case of the US that would be over 300 million individuals). This belief is what Hayek termed the "fatal conceit." Fatal because it leads those in power to expand government control at the expense of individual freedom, free enterprise, and economic prosperity.

As Hayek put it, historical experience "ought to teach the student of society a lesson of humility which should guard him against becoming an accomplice in men's fatal striving to control society - a striving which makes him not only a tyrant over his fellow, but which may well make him the destroyer of a civilization which no brain has designed but which has grown from the free efforts of millions of individuals."

Those in government who believe that they know what is best for 300 million individuals and, thus, are compelled to tell us all how to live are quilty of this fatal conceit.

Have a nice day.

DWD

PS--I extracted this Hayek quote from the blog of Star Parker (which I highly recommend). I'm quite sure that she wouldn't mind my passing it along.

ECONOMIC MISCONCEPTION #3 -- THE MINIMUM WAGE

This is the third in a series of posts relating to how the press has misled many conservatives into supporting liberal positions on certain economic issues rather than upholding the conservative point of view.

Misconception: Raising the minimum wage is good for the poor.

A recent Gallup opinion poll (Nov. 2013) found that 69% of Americans favor raising the minimum wage and, somewhat surprisingly, 58% of Republicans also favor an increase. This opinion is in direct opposition to the fundamental principle of supply and demand which states that if you raise the price of something (like labor) the demand for it will go down. That is, if you force businesses to pay more for labor they will cut back on the use of it.

Obama is preparing to push for an increase in the minimum wage to $9 per hour. The reality is that some people are simply not worth $9 per hour. So those unfortunate soles will be laid off or not hired as would have been the case. Thus, the end result is that many of the lowest wage earners (i.e., the poor) will lose their jobs or remain unemployed and become even more unemployable. Raising the minimum wage relegates yet more of the poor to the welfare rolls. Heck, if raising the minimum wage was the solution to helping the poor get ahead why not raise it to $20 per hour?

Raising the minimum wage harms exactly those persons who the policy is supposed to benefit. Just another example of the unintended consequences of government policies. The forces of supply and demand operate 24/7, everywhere around the world, without exception. No government policy, no matter how well meaning, can negate this reality.

Have a nice day.

DWD

ECONOMIC MISCONCEPTIONS #2 -- TAX HAVENS

This is the second in a series of posts relating to how the liberal press has misled many conservatives into supporting liberal positions on certain economic issues rather than upholding the conservative point of view.

Misconception: Tax havens are bad.

The term "tax haven" is a political term coined by liberals to disparage individual freedom and free trade. The liberal's goal in demonizing so called tax havens is to extract more tax revenue enabling the further expansion of big government.

Tax havens are nothing more than sovereign nations with low tax rates (Switzerland for example). Low tax rates are a good thing and they are beneficial to U.S. citizens. Low tax nations pose competition to high tax nations (such as the U.S. which, some may be surprised to hear, has the highest corporate tax rate among developed nations). This competition puts pressure on high tax nations to lower their taxes in order to compete for business capital.

The basic conservative concepts these: Competition is a good thing and taxes are a bad thing. Competition among nations relating to tax havens put pressure on the U.S. government to lower corporate and other business taxes which are bad for the economy and which facilitate the expansion of big government.
And finally, any attempt by governments to regulate or block the movement of funds to tax havens is an attack on personal freedom and free trade.

Have a nice day.

DWD

ECONOMIC MISCONCEPTIONS -- revised

(This is a corrected text of an earlier version of this post which had errors--my appologies--DWD)
The liberal media may have yet more power of persuasion than even most conservatives already believe. There are several misconceptions that many conservatives uphold that are inconsistent with a conservative point of view, at least with respect to economic issues. With appologies to some of my conservative friends, I offer the following as one that I consider to be among the most common such misconceptions (more to follow at a later date):

Misconception:  Outsourcing is bad.

"Oursourcing" is a term that has been seized upon and disparaged by liberals who desire to put (yet more) government constrains on free trade. The primary critics of outsourcing are labor unions and those particular businesses that are impacted by "foreign competition." Both free trade and competition are good things--the more the better.
Many thousands of common products that we buy and sell each day are the product of free market cooperation among multiple nations worldwide. This has been true since, and even before, the founding of American. International free trade has helped all countries worldwide to raise their living standards--including the U.S.
Today, nearly every country "outsources" TO the U.S. in some manner or other. When we ask government to curtail outsourcing we are asking for more constraints to personal freedom and to free trade. U.S. trade restrictions are typically met in kind with trade restrictions from the targeted nation which, in turn, harm U.S. business interests. It's a cut-of-your-nose-to-spite-your-face thing.

If you're not already peeved, let me offer a final comment: the slogan "Buy American" is a knock against free trade (and personal freedom) and it is a vote for more government power over freedom of association and more constraints to free trade. I LOVE American made products, but nothing has raised the quality of Fords and Chevys (and kept car prices down) more than competition from Toyota and Honda and the like. The same is true of all products, and we citizens are the benefactors.

The basic concept is: whenever we ask government to control or regulate anything having to do with personal freedom--in the long run, we lose.

Have a nice day,

DWD

VOTER DISCONNECT

I get gobs of emails lambasting politicians, and most are accurate. However, to a degree, we are misguided in simply blaming politicians--doing so deflects the responsibility from ourselves. Here is one example of how we have created our own monster:

This CBS poll identified that 77% of citizens say that the best way to cut the deficit is to cut spending as opposed to raising taxes. Pretty overwhelming consensus would you say?

However, consider this graph, when asked specifically what to cut, the same general group of citizens essentially says don't cut anything. In fact, the net of the responses is that we want more spending in most every major category (except Foreign Aid which, as I will show in a subsequent post, is so small it is hardly worth considering).

Is there not a major disconnect? We want less government spending but we want more services for ourselves and our neighbors.

Have nice day
DWD

THE NATIONAL DEBT

As shown below, in 2000, the national debt was about $6 trillion. Today it is about $16 trillion. The Congressional Budget Office projects that in ten years it will be about $26 trillion.

So how much is a trillion anyway? Most of us know that if a million is a lot, then a billion is probably really a lot. But what about a trillion? As shown in the graph below, a billion is so small that it does not even register on this graph that shows a line for one trillion.

My favorite way of describing a trillion is that for a person working at $60 per hour, 24 hours a day, 365 days a year it would take 1.9 years to earn a million dollars. To earn a billion dollars it would take them 1,900 years. But to earn a trillion dollars it would take them one million, 900 thousand years (1,900,000 years). Understanding a trillion dollars is like trying to understand the distance of a light year. When we talk of the national debt in multiples of trillions of dollars we are in deep you-know-what. And who will have to pay if we don't act now and in a big way? Our children and grandchildren.

Have a nice day.

DWD

WE ARE ROBBING OUR CHILDREN

From my previous post (various quotes):
“Young people today are being robbed. Of their rights. Of their freedom. Of their dignity. Of their futures. The culprits? My generation and our predecessors..."
As the video below explains (only in part and very understated), our children will be required to pay for the mass of benefits being dolled out by our government--which must borrow billions each year to maintain those payments, and for the most part, those payments go to pesons other than themselves. Yet, young people today believe that government ought to do more! They have no idea that the cost for all the benefits being distributed by government today will ultimately fall upon them, and the more government spends the more they will be required to repay. It is we parents who are to blame for not educating our children. Government has no resources whatsoever other than those that they take from us citizens.

http://www.youtube.com/watch?v=ogrl9yC0S50&feature=player_embedded

Have a nice day.

DWD

QUOTES OF THE DAY

“[The national debt] is not just unsustainable, foolish, and a sign of irresponsibility and poor national impulse control. It is theft from our children, and it is immoral. ... Big government is an easier choice than free enterprise. In the short run, it allows us to avoid sacrifice. ... [but] it will saddle our children and grandchildren with crushing debt.”    
-- Arthur C. Brooks, The Road to Freedom

“Young people today are being robbed. Of their rights. Of their freedom. Of their dignity. Of their futures. The culprits? My generation and our predecessors, who either created or failed to stop the world-straddling engine of theft, degradation, manipulation, and social control we call the welfare state. ... The crisis of unfunded obligations is approaching. It won’t be pretty. ... While citizen is set against citizen and citizen against immigrant in a vast system of mutual plunder (and defense against plunder), bureaucracies extend their control and both create and nurture the political constituencies that sustain them.”    
-- Tom G. Palmer, After the Welfare State

“Paradoxically, politicians become more important, have more money to spend, and derive more ego rewards if the economy is believed to work poorly. Bureaucrats may be expected to demand larger budgets when contending with economic insecurity.”

-- Randy T. Simmons, Beyond Politics: the Roots of Government Failure

“No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we will ever see on this earth!"  
“Government will always find a need for whatever money it gets.”
“Governments tend not to solve problems, only to rearrange them.”
– Ronald Reagan

“When you want to help people, you tell them the truth. When you want to help yourself, you tell them what they want to hear.” 

-- Thomas Sowell

WE HAVE ARRIVED!

We were warned, but did not heed...

Have a nice day.

DWD

SINISTER EXPANSION OF GOVERNMENT

As explained by Kevin Williamson of the National Review:

...Obama has advanced [overreaching government] without legislative assistance — and, more troubling still, in plain violation of the law. President Obama and his admirers choose to call this “pragmatism,” but what it is is a mild expression of totalitarianism, under which the interests of the country are conflated with those of the president’s administration and his party.

The problems is not simply with President Obama, but it is much larger than that:

...the United States is not going to fall for a strongman government. Instead of delegating power to a would-be president-for-life, we delegate it to a bureaucracy-without-death. You do not need to install a dictator when you’ve already had a politically supercharged permanent bureaucracy in place for 40 years or more. As is made clear by everything from campaign donations to the IRS jihad, the bureaucracy is the Left, and the Left is the bureaucracy. Elections will be held, politicians will come and go, but if you expand the power of the bureaucracy, you expand the power of the Left, of the managers and minions who share Barack Obama’s view of the world. Barack Obama isn’t the leader of the free world; he’s the front man for the permanent bureaucracy, the smiley-face mask hiding the pitiless yawning maw of total politics.

The result is a huge bureauocracy that makes its own, unilaterial decisions about what exactly the law will be, how it is to be enforced, and against whom--all outside of Congressional control and so beyond the reach of voters.

{Quotes extracted from the International Liberty blog.}

Have a nice day.
DWD